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Top European firms’ pension gap E116bn – report

EUROPE- The aggregate deficit of Europe’s largest companies, those listed in the European Dow Jones STOXX 50 index, has been put at 116 billion euros by Lane Clark & Peacock.

“There can be little doubt that Europe’s largest blue-chip companies are bearing post-retirement risk on behalf of their employees,” the actuarial consulting firm said in its new ‘Accounting for Pensions UK and Europe’ survey.

Germany leads the pension scheme deficits list with an average deficit of 4.3 billion euros deficit per company in the index, followed by Spain with 3.9 billion euros and the UK in third slot with 2.8 billion euros.

“The German deficit is big, ours is huge but we have assets to back it,” said LCP partner Alex Waite, who presented the report at a briefing in London with colleagues Bob Scott and Chris Tavener, the report’s author.

Waite also said that German companies’ average deficit was not necessarily a case for concern because pension arrangements in the country have been so far unfunded but protected by a nationwide arrangement in case of insolvency.

He added, however, that German companies were moving towards funding pension schemes.

Waite also said that gathering information for the European aspect of the survey, produced for the first time this year, has proved difficult due to companies following 12 different sets of accounting rules.

“The plethora of different accounting standards in use across Europe means that comparisons are difficult at best and frequently impossible,” the report says. But the introduction of the IAS19 accounting standard in 2005, would be instrumental in giving a clear picture, Waite added.

The companies also showed different attitudes to disclosure, with some providing detailed information while others were “far less detailed”.

The report also said the pension deficit of companies in the FTSE100 index has dropped from 55 billion pounds (83.1 billion euros) to 42 billion pounds in the year to July 2004.

“Investment returns have been better, equities markets have behaved themselves better that in the past years. Companies are beginning to pay more in pension_schemes realising that their deficit will not go away,” Scott said.

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